Matthew
I want to be financially independent in 3 years. Tips?
What steps should I take if I want to make this a gradual process?
I am in University going into my sophomore year.
Books to read? People to talk to? etc.
Thanks y'all! #finance #management #university #advice #money-management
3 answers
Donald Wood MBA / MEd
Donald’s Answer
Not sure what exactly that means but let's assume: not relying on anyone else, no debt.
So,
Live below your means
Max out your retirement opportunities
Pay off credit cards each month
Don't assume any debt
Remember that things are just things and that you do not need most of the things
Have 6 months emergency savings set aside
Save 10-20% of you take home pay after retirement
A car is a means of transportation not a reflection of you
I appreciate your last line: "a car is a means of transportation not a reflection of you." Thanks, Donald.
Matthew
Claudio S Barbosa
Claudio S’s Answer
Here is what I suggest that you do (this is based on my personal experience, having saved over a couple of million dollars):
Be as frugal as possible - every $ counts towards your savings. Remember, there is a difference between frugality and stinginess.
Do any and every job that you can do in your spare time especially if it pays. I used all of my spare time to either do part time work, sometimes 2 or 3. When someone needs someone to clean their toilet, clean the apartment, etc I raise my hand and ask - "how much"? If I am not a subject matter expert, I say, "Please let me do it, I wil do it for a discount because I have to figure it out"
The most beautiful word in finance is the word "compounding". Find out what it means. For me, savings was addicting. I save $$ regardless of how much I make. For me, it is a discipline, a hobby, a goal. Trust me, the day you realize that you can afford to pay a watch for $20,000 is the day you realize that you have made it through hard work.
When I came to this country, I have zero dollar. I remember the time I finally saved $1,000 dollars, then $10,000 dollars. I remember jumping up and down in the bank when I deposited the last $500 dollars (part time work check) so that my savings is $1,000,000. When the bank teller recorded my deposit, I asked her for a receipt with my balance to date. I showed it to her and jumped up and down again!
Mr. Barbosa,
You sure have an amazing story. I see what you have to say about saving, but, to be honest, I find it less appealing than interest rates. What are your opinions on stocks, bonds, and general investments as an alternative?
Matthew
By saving, I meant cash, stocks, bonds and real estate - what I have and what I can speak to intelligently based on my experience. I am big believer in low cost, low fee index fund investing.
Here is what I do:
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Research index fund and determine if it lines up with my overall savings/investment goal(s). I will find out how much the minimum amount to invest in, fee, comparables, etc.
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When I have saved enough cash to buy into the fund, I will open and buy the fund. If I can afford it, I will add $250 (automatic withdrawal from my checking account) each month into the fund.
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Periodically, I will look at my investment portfolio and re-balance it (e.g. 70 stock/30 bond, of which 60% stock is US and rest is International).
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Claudio S Barbosa
Ken Simmons
Ken’s Answer
Hi Matthew!
You ask some very important questions.
Tips on managing money:
http://lifehacker.com/how-to-manage-your-money-for-those-who-never-learned-g-1703892260
http://money.usnews.com/money/personal-finance/slideshows/how-to-manage-your-money-in-your-20s
Best of luck. Please keep me posted. I would like to follow your progress!
Wow. Thanks Ken for the wonderful answer.
My goal for next semester is to truly immerse myself in the opportunities that college provides. So this is right up my alley.
How do I keep you posted?
Matthew
You are welcome! You can keep me posted by leaving comments on this page. Looking forward to following your progress!
Ken Simmons